In the Old South, did cotton factors typically travel to Britain to sell cotton and buy merchandise for their clients?

grey fox · Sep 29, 2018

In Clement Eaton's book The History of the Old South, Eaton asserts that plantation owners in the Old South would hire cotton factors to supervise the selling of the plantation owners' cotton and to acquire merchandise from Great Britain. The cotton would be loaded onto ships at ports in the southern United States. Then the ships would take the cotton to Britain to sell the cotton. Then part of the money that was obtained from the selling of cotton would be used to purchase merchandise ordered by southern plantation owners in the southern United States.

It is possible that the cotton factors would typically have arrangements with British textile factories and British companies for the selling of cotton and the buying of other merchandise, and it is possible that the cotton factors would typically not travel to Britain most of the time that the cotton factor was supervising the selling of cotton and the buying of other merchandise for a plantation owner. It is possible that someone other than the plantation owner and other than the cotton factor would usually carry out the selling of the cotton in Britain and the buying of merchandise for the plantation owner in Britain.

Before the American Civil War, would cotton factors usually personally ride on the ship that carried the cotton to Great Britain to carry out the selling of the cotton and to buy merchandise in Great Britain for southern plantation owners? Or would cotton factors hired by the plantation owners usually stay in America the entire time that the cotton factors' clients' cotton went on the ship to Great Britain?

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P.S. I know that in the Old South, not all southern cotton was sold in Great Britain. I know that some southern cotton was sold to textile factories in the northern United States of America, so let's not get into that. In this thread, I am just asking about the cotton grown in the southern United States of America that did get sold in Great Britain.

betgo · Sep 29, 2018

I have a relative who was a cotton broker in New Orleans and died of a stroke on the floor of the Pit in Chicago. I kind of doubt the broker would travel to Britain with each shipment, but brokers did travel.

grey fox · Sep 29, 2018

betgo said:
I have a relative who was a cotton broker in New Orleans and died of a stroke on the floor of the Pit in Chicago. I kind of doubt the broker would travel to Britain with each shipment, but brokers did travel.

The technology of today makes it so that today it's far less likely to be necessary to have a middle man who personally goes along to supervise transactions than it would be in the 19th century. We have to remember that I am asking about the days before email, telephones, video conferences, online banking, and electronic transactions.

Chlodio · Sep 29, 2018

Did Eaton use the word 'hire' to describe the relationship between planters and cotton factors? I would think the cotton factors would be more like agents or brokers and would work on commission or perhaps on a fee basis rather than for salary or wages. I would think these cotton factors would do business with multiple planters simultaneously. If I'm right these factors or agents would be specialists. All they did was buy and sell cotton, storing it in warehouses in between. Selling supplies to planters would be a form of trade that had the advantage of reducing the amount of cash moving back and forth.

grey fox · Sep 29, 2018

Chlodio said:
Did Eaton use the word 'hire' to describe the relationship between planters and cotton factors?

I don't have Eaton's book available to me right now. I don't remember whether or not Eaton actually used the word hire.

I would think the cotton factors would be more like agents or brokers and would work on commission or perhaps on a fee basis rather than for salary or wages.

I agree. My post was not about how cotton factors were usually paid, but I am curious about that now as well.

I would think these cotton factors would do business with multiple planters simultaneously. If I'm right these factors or agents would be specialists. All they did was buy and sell cotton, storing it in warehouses in between. Selling supplies to planters would be a form of trade that had the advantage of reducing the amount of cash moving back and forth.

Yes, the cotton factors were specialists. All the cotton factors did was buy and sell cotton and buy and sell general merchandise (such as clothes, spices, furniture, medications, firearms, etc.) in England or other places for the planters.

I'm fairly sure (but not quite 100% sure) that Eaton mentioned that the cotton factors would store the cotton in warehouses before the factors were ready to have the cotton shipped to England and/or other places to sell it. It is possible that cotton factors would do business with multiple planters simultaneously and still usually (or perhaps always) travel with the boat shipping the cotton because more than one planters' cotton could be shipped on the same ship.

Chlodio, what do you think specifically about the question in my OP? I'm assuming that you don't know the answer or you would have answered the question otherwise, but would you care to speculate on this?

Pedro · Sep 29, 2018

grey fox said:
plantation owners in the Old South would hire cotton factors

I assume factors are persons, but I am not quite sure, could you elucidate?

grey fox · Sep 29, 2018

Pedro said:
I assume factors are persons, but I am not quite sure, could you elucidate?

Yes, cotton factors were persons.

Sindane · Sep 29, 2018

I might be wrong but as far as I know mill owners would buy raw cotton at the warehouses at the docks, Liverpool for example, or at the exchanges. This would be in the UK.

The Importing side of it was a whole industry in itself. The importers would have representatives in the USA responsible for the purchasing side. The cotton would be insured for the journey, so I don't suppose there would be any need to travel with the shipment

Pedro · Sep 29, 2018

grey fox said:
Yes, cotton factors were persons.

What was their function?

Chlodio · Sep 29, 2018

grey fox said:
Chlodio, what do you think specifically about the question in my OP? I'm assuming that you don't know the answer or you would have answered the question otherwise, but would you care to speculate on this?

My speculation is along the lines of what Sindane describes with firms having representatives on both sides of the Atlantic or two separate companies, one on each continent, but they would have long standing working business relationships with each other. There would be no need for someone to travel with the cotton on a ship. One partner would load it in American and another partner would offload it in Britain.

Sindane · Sep 29, 2018

Something to bear in mind is that these textile mills in the UK, and there were thousands of them, varied in size. Anything from a small backstreet business to huge multi storey mile long buildings.

Obviously the large mill barons would have ruled the roost but the many smaller businesses, when you add them all up, were important too. The large mills would have offices at the docks, the small ones would have bought locally. Parts of these mill towns/cities had whole areas dedicated to just warehouse buildings. Some mills had their own rail branch lines and railway stations.

Nemowork · Sep 29, 2018

Pedro said:
I assume factors are persons, but I am not quite sure, could you elucidate?

In 18th century British terminology the factor was the title of the man who ran a business, usually at a long distance from the owner. for example the men sent out to india to buy raw materials and contract with the locals for the production of finished goods was the factor.

the establishment he set up where he ran this devolved business became known as the factory, by the 19th century the title had got stuck onto any businesses where manufacturing occurred.

grey fox · Sep 29, 2018

Sindane said:
I might be wrong but as far as I know mill owners would buy raw cotton at the warehouses at the docks, Liverpool for example, or at the exchanges. This would be in the UK.

Why do you think that the mill owners would buy raw cotton at the warehouses at the docks? How do you know that the mill owners themselves did not have representatives in America who would buy the cotton before the cotton was shipped to Great Britain? I'm not arguing with you. I'm just trying to get information.

The Importing side of it was a whole industry in itself. The importers would have representatives in the USA responsible for the purchasing side. The cotton would be insured for the journey, so I don't suppose there would be any need to travel with the shipment

How do you know that the importers would have representatives in the USA responsible for the purchasing side? In Antebellum times, would the importer be a company that is distinct from the textile factory in Great Britain that ultimately bought the cotton?

How do you know that the cotton factors did not have warehouses in Great Britain that the cotton factors would use to store the cotton while the cotton factors sold the cotton directly to the textile factory owners? I'm not asserting that the cotton factors had warehouses in Great Britain that the cotton factors would use to store the cotton while the cotton factors sold the cotton directly to the textile factory owners. I'm just curious as to how you know that's not the case.

grey fox · Sep 29, 2018

Pedro said:
What was their function?

In a way, my asking what was the function of cotton factors is kind of the purpose of this thread. I know very little about cotton factors in the Old South. What I know about cotton factors is that plantation owners in the Old South would pay cotton factors to supervise the selling of the planters' cotton and to use the money obtained from selling the cotton to buy general merchandise in Great Britain.

Sindane · Sep 29, 2018

grey fox said:
Why do you think that the mill owners would buy raw cotton at the warehouses at the docks? How do you know that the mill owners themselves did not have representatives in America who would buy the cotton before the cotton was shipped to Great Britain? I'm not arguing with you. I'm just trying to get information.

How do you know that the importers would have representatives in the USA responsible for the purchasing side? In Antebellum times, would the importer be a company that is distinct from the textile factory in Great Britain that ultimately bought the cotton?

How do you know that the cotton factors did not have warehouses in Great Britain that the cotton factors would use to store the cotton while the cotton factors sold the cotton directly to the textile factory owners? I'm not asserting that the cotton factors had warehouses in Great Britain that the cotton factors would use to store the cotton while the cotton factors sold the cotton directly to the textile factory owners. I'm just curious as to how you know that's not the case.

I suppose the big mill owners would be able to cut out the middle man and have their own representatives in the USA. But this is why I also mentioned the smaller mill owners/manufacturers , who would buy the cotton at the docks, or locally, from dealers. Though the big mill owners would also visit these dealers too. To keep up with any latest imports. New cotton strains, innovations, blends and so on.

Deciding which raw cotton to purchase would be a specialised job. The cotton had to be correct for the machinery, the industrial frames (spinning) and looms (weaving). The ACW was disastrous because the machinery had only been able to handle American cotton and attempts to replace the cotton shortage with cotton from elsewhere failed, as the machinery had been designed to spin and weave only American fibres. This led to widespread manufacturing distress for the duration of the war

Sindane · Sep 29, 2018

International Cotton Association - Wikipedia

1759-1829
The first recorded cotton dealing in Liverpool was a newspaper advertisement for an auction of 28 bags of Jamaican cotton in 1759. Over the next seven decades the Industrial Revolution brought major changes to cotton production. Liverpool enjoyed a physical proximity to the world centre of the industry - the Lancashire cotton towns.[6] It also had well-established trading links with the new powerhouse of raw cotton - the USA. As imports soared to the million-bale mark, Liverpool overtook London as the country’s leading cotton importer.[1]

1830-1913
... The Liverpool Cotton Brokers’ Association was established in 1841 and it quickly established a successful system of arbitration. The Transatlantic Telegraph Cable reduced long distance communication from weeks to minutes. Liverpool broker John Rew recognised the far-reaching implications of this development and created the hedge fund system. This led to the hugely successful Liverpool Cotton Futures Market, which doubled the business of the Liverpool Cotton Market. In 1911-12 Liverpool imported 5,230,399 bales of cotton.[1]

Added

This looks interesting and worth a read

1898 Revenues: Cotton Brokers: Henry Hentz & Company

"The cotton firm of H. Hentz & Co. was established by Henry Hentz in 1856. Mr. Hentz was the President of the New York Cotton Exchange from 1873 to 1876.

In the December 20, 1890 edition of The New York Times, Henry Hentz reflected on the history and conditions of the cotton industry, and the change in the business in the late 1800s to the trading of futures contracts on exchanges. Mr. Hentz' reflections offer a fascinating summary of the trade in cotton during the mid to late 1800s,..."

Chlodio · Sep 30, 2018

The system of long range trading partners that Sindane and I have described was already functioning in Medieval times, so it was not new in the 19th century. Buying cotton on futures contracts may have been new, but not long range trading partners. Wool merchants in England might load up a ship with L500 worth of wool and send it to Flanders where a partner would sell it for L1,000 to dyers and weavers who turn it into cloth. The man in Flanders would send L500 worth of cloth back to his partner England who would sell it for L1,000. The man in Flanders would also send back an accounting statement saying "I received your wool and sold it for L1,000. You therefore have a L1,000 credit here in Flanders." With his next wool shipment, the man in England would send a similar statement "I have received your cloth and sold it for L1,000. You now have a L1,000 credit here in England." On his next shipment back to England the Flanders man would say "You can have my L1,000 and I'll take yours, and we'll call it even." Both men got paid without any need to ship money across long distances. Come forward 600 years, change wool to cotton, and Flanders to South Carolina and pretty much the same thing is happening. Cotton was exchanged for British manufactured goods, everyone was making money, without any need for money to be shipped long distances.

Plantations were big businesses. They made all of their money once a year, at harvest time. We're talking the modern equivalent of hundreds of thousands of dollars. Rather than transfer all of that cash, it was easier for the factor to just give the planter credit. Throughout the year, as the planter made purchases, he paid for them by applying debits against the credit held by his factor. The factor therefore did most of the planter's purchasing for him. In your example, these goods were manufactured in Britain. The factor knew what kinds of goods the planters would want, so he advised his British partner on what kind of goods to send.

peccavi · Sep 30, 2018

The transaction would typically be made using a Bill of Lading and still is.

The "old fashioned" method was for the seller to receive the B\L from the ship owner when the ship had been loaded. The Seller then presents to the B\L to his Bank (in the US), meanwhile the corresponding Bank in the UK receives the monies from the buyer. The US Bank informs the UK that the B\L is clean (ie quantity and goods are as stated and other conditions,eg no-transship, fob or cif terms etc are correct). Providing everything is Ok, the monies are transferred to the US Bank who credits the US seller whilst the original B\L is sent via the UK Bank to the buyer.

The B\L is a financial instrument and the Shipping Line will only release the Goods on presentation by the Buyer or his agent of a valid confirmed B\L .

So everyone is happy - especially the Banks who naturally charge for their services!

Speculatin' · Sep 30, 2018

off topic, but possibly related (vaguely): A sister of my great grandfather (last name Green) married an Englishman. Hardly any records or traces of her line seem to exist. She was born in New Albany, Indiana, across the river from Louisville, Ky, in 1838. Her older English husband was supposedly born in 1825. The next info is their first child was born in Louisiana in 1859, and the next child was born in Alabama in 1863, in the middle of the Civil War. Then there is a gap of 9 years, and two more children were born in Ohio and Kentucky. No records seem to exist about what ever happened to the children, except one son who died at 13 years of age or so. The question is, what was that Englishman and wife doing down there in the deep south before and during the war? My great grandfather, her brother, fought in the Union army. Weird!

Edratman · Sep 30, 2018

Here is a link to an excellent paper on the factor system. There is one line in the paper that indicates that the factors did not usually travel, instead the factor dealt with an additional middleman termed "broker".

"In the early days cotton sales were effected through a broker who acted as a middleman be- tween the factor and the resident agent of a foreign mill or merchant."

The Cotton Factorage System of the Southern States

https://www.jstor.org/stable/pdf/1835857.pdf

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In the Old South, did cotton factors typically travel to Britain to sell cotton and buy merchandise for their clients?

grey fox

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